Which of the following is not an example of the application of professional skep

Question

Which of the following is not an example of the application of professional skepticism? (Points : 5) Designing additional auditing procedures to obtain more reliable evidence in support of a particular financial statement assertion Obtaining corroboration of management's explanations through consultation with a specialist Inquiring of prior year engagement personnel regarding their assessment of management's honesty and integrity Using third-party confirmations to provide support for management's representations Question 5.5. (TCO 3) Under the ethical standards of the profession, which of the following investments in a client is not considered to be a direct financial interest? (Points : 5) An investment held through a nonclient regulated mutual fund An investment held through a nonclient investment club An investment held in a blind trust An investment held by the trustee of a trust Question 6.6. (TCO 2) A client decides not to make an auditor's proposed adjustments that collectively are not material, and wants the auditor to issue the report based on the unadjusted numbers. Which of the following statements is correct regarding the financial statement presentation? (Points : 5) The financial statements are free from material misstatement, and no disclosure is required in the notes to the financial statements. The financial statements do not conform with generally accepted accounting principles (GAAP). The financial statements contain unadjusted misstatements that should result in a qualified opinion. The financial statements are free from material misstatement, but disclosure of the proposed adjustments is required in the notes to the financial statements. Question 7.7. (TCO 5) The use of prenumbered sales invoices is meant to prevent (Points : 5) the failure to bill or record sales. duplicate billings and recording of sales. Both A and B Neither A nor B Question 8.8. (TCO 6) Auditors must make decisions regarding what evidence to gather and how much to accumulate. Which of the following is not a decision that must be made by auditors related to evidence? (Points : 5) Audit procedure to use Sample size Timing of each audit procedure Each of the above is a decision that must be made Question 9.9. (TCO 7) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the (Points : 5) inherent risk. acceptable audit risk. statistical risk. financial risk. Question 10.10. (TCO 8) In setting materiality guidelines for current assets, the two standard setters, FASB and the AICPA, provide the following guidelines to practitioners (Points : 5) both agree that it should be greater than 5%. both agree that materiality should be set at an amount greater than 10% of current assets. both agree that materiality should be set at an amount greater than 10% of current assets. no specific materiality guidelines are provided by either of them. Question 11.11. (TCO 9) Which of the following best illustrates the concept of sampling risk? (Points : 5) The documents related to the chosen sample may not be available to the auditor for inspection. An auditor may fail to recognize errors in the documents from the sample. A randomly chosen sample may not be representative of the population as a whole for the characteristic of interest. An auditor may select audit procedures that are not appropriate to achieve the specific objective. Question 12.12. (TCO 10) The audit procedure that is least useful in gathering evidence on significant computer processes is (Points : 5) documentation. observation. test decks. generalized audit software. Question 13.13. (TCO 11) Which of the following is not a condition for a contingent liability to exist? (Points : 5) There is a potential future payment to an outside party that would result from a current condition. There is uncertainty about the amount of the future payment. The outcome of an uncertainty will be resolved by some future event. The amount of the future payment is reasonably estimable. Question 14.14. (TCO 5) Which of the following audit tests would be regarded as a test of a control? (Points : 5) Tests of the specific items making up the balance in a given general ledger account Tests of the inventory pricing to vendor's invoices Tests of the signatures on canceled checks to the board of directors' authorizations Tests of the additions to property, plant, and equipment by physical inspections Question 15.15. (TCO 5) Which of the following audit tests would be regarded as a substantive test of transactions? (Points : 5) Trace recorded sales in the sales journal to the related accounts receivable master file, and compare the customer name, date, and amount for each one. Review the prelisting in the cash receipts book to determine whether cash is prelisted daily. Review cancelled checks for proper management authorizations. Examine sales returns for approval by an authorized official. Question 16.16. (TCO 6) Which of the following is not a potential effect of an auditor's decision that a lower acceptable audit risk is appropriate? (Points : 5) More evidence is required Less evidence is required Special care is required in assigning experienced staff Review of the working papers by personnel who were not assigned to the engagement Question 17.17. (TCO 6) Which of the following statements is correct regarding the costs involved in obtaining evidence? (Points : 5) Cost of obtaining evidence is a valid reason for excluding that evidence from the audit. Physical examination is the most expensive type of audit evidence. The least expensive type of evidence is analytical procedures. Each of the above is correct Question 18.18. (TCO 9) In attributes sampling, an estimate of the expected population exception rate is necessary to plan the sample size. The relationship of expected population exception rate (EPER) to sample size is (Points : 5) direct (small EPER = small sample). inverse (small EPER = large sample). a variable (sometimes small, sometimes large), dependent on other factors present. indeterminate.

Explanation / Answer

Ans;

(TCO 3) The organization that is responsible for providing oversight for auditors of public companies is called the _____

Auditing Standards Board.

American Institution of Public Accountants.

Accounting Oversight Board.

Public Company Accounting Oversight Board.

:

Adequate planning and supervision

Due professional care

Understand the entity and its environment, including internal control

Sufficient appropriate audit evidence

(TCO 1) Which of the following is not an example of the application of professional skepticism?

Designing additional auditing procedures to obtain more reliable evidence in support of a particular financial statement assertion

Obtaining corroboration of management's explanations through consultation with a specialist

Inquiring of prior year engagement personnel regarding their assessment of management's honesty and integrity

Using third-party confirmations to provide support for management's representations.

Choice C is correct. The auditor should consider that fraud might occur regardless of any past experience with the entity. An assessment of management's honesty and integrity performed during the previous year would not necessarily be relevant to the current year's audit.
Choice A is incorrect. An auditor might apply professional skepticism by performing additional audit procedures designed to improve the reliability of evidence.
Choice B is incorrect. Corroborating management's explanations is an example of the application of professional skepticism because the auditor is obtaining additional support rather than simply accepting the explanation as given.
Choice D is incorrect. Using third-party confirmations to provide support for management's representations is an example of the application of professional skepticism, because the auditor is obtaining additional support rather than simply accepting the explanation as given.

(TCO 1) An operational audit has as one of its objectives to

determine whether the financial statements fairly present the entity’s operations.

evaluate the feasibility of attaining the entity’s operational objectives.

make recommendations for improving performance.

report on the entity’s relative success in attaining profit maximization.

(TCO 1) Which of the following services do not need to be preapproved by the audit committee of an issuer?

Tax services

Nonaudit services that are less than 5 % of total revenues from the audit client

Services provided by the auditor on a recurring basis

Nonaudit services related to internal control over financial reporting

Choice B is correct. Nonaudit services that do not exceed 5% of total revenues from an audit client do not require audit committee preapproval as long as the services are brought to the audit committee's attention and approved before the completion of the audit.
Choice A is incorrect. Tax services must be preapproved by the audit committee.
Choice C is incorrect. All audit, review, attestation, tax, and significant nonaudit services must be preapproved by the audit committee, even if provided on a recurring basis.
Choice D is incorrect. Nonaudit services related to internal control over financial reporting must be preapproved by the audit committee.

(TCO 3) The concept of materiality would be least important to an auditor when considering the

adequacy of disclosure of a client's illegal act.

discovery of weaknesses in a client's internal control.

effects of a direct financial interest in the client on the CPA's independence.

decision whether to use positive or negative confirmations of accounts receivable.

Choice C is correct. Any direct financial interest in a client impairs independence, even if it is immaterial.
Choice A is incorrect. A material illegal act may require disclosure in or adjustment to the financial statements, whereas an immaterial illegal act may not require disclosure.
Choice B is incorrect. A material weakness in internal control will affect the nature, timing, and extent of audit procedures, whereas an immaterial weakness in internal control may have little impact on the audit.
Choice D is incorrect. An auditor is likely to use positive confirmations for material accounts receivable, but may consider negative confirmations for immaterial receivable balances.

(TCO 3) Independence in auditing means

remaining aloof from a client.

not being financially dependent on a client.

taking an unbaised and objective viewpoint.

being an advocate for a client.

(TCO 3) The financial interests of which of the following parties would not be included as a direct financial interest of the CPA?

Spouse

Dependent child

Relative supported by the CPA

Sibling living in the same city as the CPA

(TCO 1) The phrase U.S. generally accepted accounting principles is an accounting term that

includes broad guidelines of general application but not detailed practices and procedures.

encompasses the conventions, rules, and procedures necessary to define U.S. accepted accounting practice at a particular time.

provides a measure of conventions, rules, and procedures governed by the AICPA.

is included in the audit report to indicate that the audit has been conducted in accordance with generally accepted auditing standards (GAAS).

Choice B is correct. The literature pertaining to U.S. GAAP changes over time, and therefore, U.S. generally accepted accounting principles can be said to encompass the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. U.S. GAAP is one of the financial reporting frameworks acceptable for preparation of financial statements. IFRS is another one.
Choice A is incorrect. The literature pertaining to U.S. GAAP does provide detailed practices and procedures.
Choice C is incorrect. The phrase U.S. generally accepted accounting principles does not provide a measure of conventions, rules, and procedures governed by the AICPA. The AICPA provides statements on auditing standards, which relate to proper performance of a financial statement audit, not to accounting principles.
Choice D is incorrect. Inclusion of the phrase U.S. generally accepted accounting principles in the audit report indicates whether the financial statements are presented in accordance with the conventions, rules, and procedures that define accepted accounting practice in the United States. Inclusion of this phrase does not indicate whether the audit has been conducted in accordance with generally accepted auditing standards (GAAS).

(TCO 1) Which of the following items impairs independence under U.S. ethics standards but does not necessarily impair independence under the IFAC Code of Ethics for Professional Accountants?

An immaterial direct financial interest in an audit client

Employment at a client of an immediate family member of the engagement partner in a key accounting position

The auditor also provides internal audit outsourcing services

Contingent fee arrangements for audit engagements

Choice C is correct. Under the IFAC Code of Ethics, an auditor may provide internal audit services if appropriate safeguards are put in place to limit or eliminate any threats to independence. Internal audit outsourcing services may not be provided to audit clients under U.S. ethics standards.
Choice A is incorrect. Any direct financial interest impairs independence under both U.S. ethics standards and the IFAC Code of Ethics.
Choice B is incorrect. Employment at a client of an immediate family member of any audit team member in a key position impairs independence under both U.S. ethics standards and the IFAC Code of Ethics.
Choice D is incorrect. Contingent fee arrangements impair independence under both U.S. ethics standards and the IFAC Code of Ethics.

(TCO 3) The organization that is responsible for providing oversight for auditors of public companies is called the _____

Auditing Standards Board.

American Institution of Public Accountants.

Accounting Oversight Board.

Public Company Accounting Oversight Board.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.